How Elon Musk Pulled X Back From the Brink

Summary

The Journal: How Elon Musk Rescued X From the Brink Release Date: April 16, 2025

Introduction In the latest episode of The Journal, Jessica Mendoza and Alexander Saidi delve into the tumultuous journey of X—the platform formerly known as Twitter—and how Elon Musk orchestrated its dramatic comeback. Acquired in 2022 for a staggering $44 billion, X faced significant challenges, including mass user departures and a exodus of advertisers. This comprehensive summary outlines the key discussions, insights, and strategic maneuvers that led to X's resurgence under Musk's leadership.

Elon Musk’s Acquisition and Initial Struggles Elon Musk's acquisition of Twitter in late 2022 marked the beginning of a challenging era for the social media giant. Shortly after the purchase, Musk rebranded the platform as X and initiated substantial layoffs, including dismantling the content moderation team. These drastic changes led to a rapid decline in user trust and advertiser confidence. Jessica Mendoza highlights the severity of the situation:

"Musk said Twitter was... quickly losing money and filing for bankruptcy is not out of the question." [00:24]

Alexander Saidi adds that the financial strain extended to the banks that financed the deal, expressing their reluctance to keep their capital tied up in X's struggling operations:

"The world's richest man bought the social media platform. Last week, nearly a million Twitter users leave... it was a really tough deal for the banks." [00:16, 01:03]

Financial Turmoil and Banking Challenges Musk's acquisition involved a significant financial burden. He invested approximately $30 billion of his own funds and secured an additional $13 billion through loans from major banks like Morgan Stanley and Bank of America. As X began to falter, these banks found themselves burdened with substantial debt tied to a plummeting asset.

"The banks were stuck holding debt that... they don't want to, you know, have their money tied up in these loans." [01:03]

Strategic Alliance with Donald Trump A pivotal moment in X's turnaround was Musk's strategic alliance with former President Donald Trump. By endorsing Trump and financially supporting his re-election campaign with over $250 million, Musk positioned himself favorably within political circles. This alliance sparked investor enthusiasm, particularly among those optimistic about Trump's pro-business policies.

"Musk capitalized on a wave of investor enthusiasm... X kind of looked like another Trump trade." [03:55, 04:18]

Reclaiming Advertisers and Revenue Recovery Leveraging his political connections and renewed investor confidence, Musk successfully enticed major advertisers back to X. Noteworthy companies like Amazon and Apple resumed their advertising efforts on the platform, reversing previous departures.

"Advertisers who hadn't been on the platform in a while were willing to come back... Amazon announced that they would come back." [04:25, 04:54]

Mendoza explains that these developments significantly improved X's revenue streams:

"Revenue has started to tick back up... aggressive cuts Musk had made early on also helped the company's finances to recover." [06:14]

Political Leverage and Influence X's enhanced relationship with the administration provided Musk with additional leverage over advertisers. An incident involving the advertising firm Interpublic showcased how Musk wielded political influence to secure more ad spending for X.

"A lawyer from X called a lawyer at this advertising group... 'Your deal to merge could face trouble given Musk's sort of powerful role there.'" [05:37, 05:56]

While Interpublic denied making spending commitments based on these interactions, the incident highlighted the intertwined nature of business and politics in X's recovery strategy.

Debt Restructuring and Financial Stabilization To alleviate the financial strain, the banks involved in X's acquisition attempted to sell off Musk's debt. Contrary to expectations, these efforts were highly successful. Initially aiming to sell $3 billion of debt, the banks ultimately offloaded $10 billion, signaling strong market confidence in X's financial stability.

"The debt sale shows just how far X has come in the past year." [07:14, 08:01]

The Rise of XAI and Integration with X In 2023, Musk founded XAI, an artificial intelligence company renowned for its AI chatbot, Grok. XAI's synergy with X proved advantageous, as the social media platform provided vast amounts of real-time data essential for training AI models. This interconnection extended to resource sharing, with X supplying XAI with computer chips and other critical hardware in exchange for stock, further intertwining the two entities.

"XAI has trained itself off of X Twitter data... one key advantage XAI can boast is its connection to Musk's other companies." [09:05, 10:01]

Employees began holding dual roles in both companies, reflecting Musk's strategic focus on integrating his ventures to bolster their collective strengths.

Merger of X and XAI: The Vision for an Everything App Musk's grand vision culminated in the merger of X and XAI, announced at over $100 billion in combined valuation. This unprecedented move was facilitated by the same law firm and bank advising both companies, a rare occurrence intended to streamline the merger process. The unified entity aims to realize Musk's ambition of creating an "Everything app" where users can handle payments, messaging, news consumption, and more within a single platform.

"The combined valuation of the two companies was over $100 billion... creating what he calls the Everything app." [12:52, 13:11]

Saidi emphasizes that this merger represents a significant step towards integrating various services, leveraging XAI's computing power to drive innovation within X.

"With X and Xai as one, it will move more in that direction. Xai can be the computing power that makes all of the Everything happen." [13:11]

Analyzing Musk’s Business Acumen The episode concludes with an analysis of Musk's strategic prowess. Saidi commends Musk for making calculated bets that paid off, such as aligning with influential political figures and optimizing resource allocation across his companies. Nonetheless, he cautions that future challenges remain, and the sustainability of X and XAI's success is yet to be fully tested.

"He can make a few good bets and have them pay off... but who knows what the future holds?" [14:05, 14:18]

Conclusion Elon Musk's ability to navigate X from the brink of bankruptcy to a thriving, multifaceted platform underscores his unique approach to business and his knack for leveraging political and financial networks. The merger with XAI not only solidifies X's position in the social media landscape but also paves the way for innovative integrations that could redefine digital interactions. As X continues to evolve, the outcomes of Musk's ambitious strategies will undoubtedly remain a focal point for investors, users, and industry observers alike.

Transcript

[Jessica Mendoza]

The platform, formerly known as Twitter, has had a tough couple years. The difficulties began in 2022 when Elon Musk purchased it for $44 billion.

[Alexander Saidi]

The world's richest man bought the social media platform. Last week, nearly a million Twitter users leave. As Elon Musk takes over.

[Jessica Mendoza]

Advertisers continue to flee the platform, many of them citing Musk's controversial moves as the company. Musk said Twitter was qu. Quickly losing money and filing for bankruptcy is not out of the question. Elon Musk is scrambling quite simply to prevent the social media platform from collapsing. To buy Twitter, which Musk renamed X, he and a small group of investors spent some $30 billion of their own money. But Musk also had to borrow 13 billion more from big banks like Morgan Stanley and Bank of America. And as the platform started to struggle, those banks felt the pain. Here's our colleague Alexander Saidi, who covers banking.

[Alexander Saidi]

It was a really tough deal for the banks. They were stuck holding debt that, you know, while they were getting paid interest on it, they don't want to, you know, have their money tied up in these loans. So it wasn't something they loved.

[Jessica Mendoza]

But we're talking now because the story's changed.

[Alexander Saidi]

The story has changed.

[Jessica Mendoza]

While another one of Musk's big name companies, Tesla, has been in a slump recently, X has seen a huge turnaround. Last month, the company reached its highest valuation since Musk took over. And he said that X is now worth more than the 44 billion he paid for it.

[Alexander Saidi]

It's as much of the company's performance as it is, one, the world's richest man owns this company, and two, he's now very close with the most powerful man in the United States, the President.

[Jessica Mendoza]

Welcome to the Journal, our show about money, business and power. I'm Jessica Mendoza. It's Wednesday, April 16th. Coming up on the show, how Elon Musk pulled off a comeback for X. It didn't take long after Musk's takeover of Twitter for the company to stumble. One of his first moves, besides renaming the site to X, was to lay off many of the company's workers. As part of that, he dismantled the platform's content moderation team. And soon after, X began to lose revenue, in part because advertisers started to flee.

[Alexander Saidi]

Advertisers started to signal that they weren't sure that they wanted to keep advertising on Twitter, soon to be X. Because of the new ownership, the financial picture just really deteriorated. And that was true for about two years.

[Jessica Mendoza]

Soon after Musk took over, he. He said that the company was on the brink of bankruptcy in 2023. The company was valued at roughly a third of what Musk paid for it. But while his business was on a downturn, Musk himself was growing closer with someone who was on the rise.

[Alexander Saidi]

Where is he? Come on up here, Elon.

[Jessica Mendoza]

Donald Trump.

[Alexander Saidi]

Take over, Elon. Yes, take over.

[Jessica Mendoza]

Musk officially endorsed Trump and showed up to a number of his rallies. He also donated more than a quarter of a billion dollars to the re election effort. When Trump took office in January, Wall street was excited about his expected pro business policies. And Musk, with his close relationship to Trump, also got a boost.

[Alexander Saidi]

Musk capitalized on a wave of investor enthusiasm for him and his companies because of his alliance with President Trump. You know, there's a lot of Trump trades happening around that time, and in a way, X kind of looked like another Trump trade. And I think that that's what people felt really positive about.

[Jessica Mendoza]

What did all this mean for X and its finances? Like, did advertisers get excited again on the advertiser front?

[Alexander Saidi]

I mean, what you saw was advertisers who hadn't been on the platform in a while were willing to come back. I mean, most notably, Amazon announced that they would come back, which is a major shift after pulling advertising more than a year ago. Apple also is ramping up ad spending on X. So without a doubt, you're seeing the momentum from advertisers move in a positive direction.

[Jessica Mendoza]

While some advertisers have been returning to X on their own, Musk has also started to flex his connections with the administration.

[Alexander Saidi]

Not only does Musk now have like financial power and commercial power, he's got political power. You know, X also had a little bit of a stick too. You know, they could say, hey, we are really close with the administration now. You gotta, like respect us.

[Jessica Mendoza]

In one incident last December, one of X's lawyers called up a big advertising firm, Interpublic, which was in the middle of a big merger with another ad company. According to Wall Street Journal reporting, X wanted to see Interpublic spend more on ads on the platform.

[Alexander Saidi]

A lawyer from X called a lawyer at this advertising group, Interpublic, and said that your deal to merge could face trouble given Musk's sort of powerful role there. So we need you to sort of play ball with us, otherwise we could make your life a little difficult.

[Jessica Mendoza]

Can they do that? Is that legal?

[Alexander Saidi]

Well, they did it according to our reporting. And I don't think it was sort of like if you don't advertise now we're blocking the merger. But I think it was more of a sort of like, it's a nice ad agency you got there. It would be a shame if something happened to it at the time.

[Jessica Mendoza]

A spokesman for Interpublic said the company does not make spending commitments on behalf of its clients. Representatives from X did not respond to requests for comment. With some advertisers returning to X, revenue has started to tick back up. According to the Journal's reporting, the aggressive cuts Musk had made early on also helped the company's finances to recover. For the banks that invested in the original deal, this was all great news. It meant they might be able to offload some of Musk's debt.

[Alexander Saidi]

The way bank loans like that often work is that the banks, while they sort of put the cash upfront to make sure the deal can happen, they often will sell and cut up those loans and give them to a broad investor base. Everything from mutual funds that can hold corporate debt, like a bond fund, to asset managers who focus on corporate debt. And that was the plan on the bank side.

[Jessica Mendoza]

And earlier this year, the banks tried to finally make that sale. In January, a crowd of investors gathered in an auditorium at the Morgan Stanley office in New York. The banks were there to sell about $3 billion of Musk's debt.

[Alexander Saidi]

It was the first time that the banks had decided we were going to test the whole market and see if there's interest in buying this debt.

[Jessica Mendoza]

And things went really well, better than the banks even expected.

[Alexander Saidi]

All in, including a series of transactions that played out over about a month after that happened. The banks ended up selling $10 billion of debt all in when they were only planning to sell around 3.

[Jessica Mendoza]

The debt sale shows just how far X has come in the past year. And recently Musk made an announcement that builds on that success. It has to do with another one of his Xai. That's after the break.

[C]

This episode is brought to you by Lifelock. It's tax season, and we're all a bit tired of numbers, but here's one you need to $16.5 billion. That's how much the IRS flagged for possible identity fraud last year. Now here's a good number. 100 million. That's how many data points Lifelock monitors every second. If your identity is stolen, they'll fix it, guaranteed. Save up to 40% your first year. @lifelock.com podcast terms apply.

[Jessica Mendoza]

In 2023, Elon Musk founded an artificial intelligence company, and he named it, of.

[Alexander Saidi]

Course, Xai Musk really likes X. I'm sure there must be something about it. Like, you know, SpaceX, it's his favorite letter, right? Yeah, yeah, yeah. There must be some reason to it he's such a nerd. Like, I'm sure there's some nerdy reason. I'd say this as a nerd myself.

[Jessica Mendoza]

XAI is best known for its AI chatbot, Grok. Its most notorious feature is that when it answers questions, it might swear. And overall, Grok has an edgier attitude than your typical chatbot. XAI isn't the world's biggest artificial intelligence platform, but investors see it as a startup with potential. And one key advantage XAI can boast is its connection to Musk's other companies. First of all, when it comes to creating an artificial intelligence model, engineers have to feed that model tons of data. And thanks to X, there's a lot of available data for xai.

[Alexander Saidi]

XAI has trained itself off of X Twitter data, which, you know, is quite extensive. And there's a lot of data that automatically gets loaded up to it. Financial market data, commentary, news. So, you know, one of the advantages I think XAI has is that it's not training itself off of a static set of existing data. It actually has found a sort of live database that is truly in real time being updated with developments around the world.

[Jessica Mendoza]

According to people familiar with the matter, XAI has paid X hundreds of millions of dollars for that data, which is helping the social media company pay its bills. And that's not the only financial tie between the two. X has given XAI computer chips and other crucial hardware, and in return, X got a bunch of stock in this increasingly valuable AI company. This close relationship extends to employees as well.

[Alexander Saidi]

People were starting to sort of work for two companies at the same time. Like, you started to see there were people at X who had, you know, two hats at once. They were both X AI and X engineers, for example. So Elon was very purposefully, you know, moving resources inside of his empire towards the AI company. It was clearly a big priority for him.

[Jessica Mendoza]

Would you say that Musk is using or has used XAI to maintain X's success or X's, like, viability?

[Alexander Saidi]

I think what I can say with confidence is that X is a lot better off because of xai. There is a huge advantage in having this web of companies that kind of rely on each other and can share resources. Like, if one business is going through problems, then you can pull on some of your others to help it out.

[Jessica Mendoza]

X's growing ties to XAI made The social media company more and more attractive to new investors. And then last month, Musk announced something that really got them excited. In a post on X, he said that he was bringing the two companies together. X would be folded into Xai. So Musk announced the merger. How did he go about doing that? What do we know about the deal?

[Alexander Saidi]

Yeah, I mean, it was definitely a very unique transaction in a lot of ways. I mean, one thing that might give you a sense for the flavor of the kind of deal it was was that you actually had, you know, for X and Xai, they had the same law firm and the same bank advising both companies on the deal. So normally that never happens because you want to ensure that each side is getting the best deal for themselves. So everyone acknowledged that's not typical. It's not usual.

[Jessica Mendoza]

In the announcement, Musk said that the combined valuation of the two companies was over $100 billion. He said it was, quote, just the beginning. Alex says the merger marks a significant step towards fulfilling one of Musk's most well documented ambitions, creating what he calls the Everything app.

[Alexander Saidi]

One key thing to remember is when Elon bought Twitter, he very explicitly said, you know, my goal is to, one, rechristen it X and then to turn this into the Everything app. You do your payments through it, you do messaging through it, you communicate and read the news through it. And the question was like, okay, so you want to do that. How are you going to do that? And now it's become clear that the way he at least first sees himself embarking on doing that is by merging these two companies together. And I think that there's no doubt about it that with X and Xai as one, it will move more in that direction. Xai can be the computing power that makes all of the Everything happen.

[Jessica Mendoza]

What does this story say about the way Elon Musk does business?

[Alexander Saidi]

I think it shows that he can make a few good bets and have them pay off. He bet on the right horse in the election. He listened to the advice that was being given to him to use this open window in the beginning of 2025 to sell things to investors, and that paved the way for these successes. And obviously, I mean, Xai, its interrelations with X have been true for the entirety of its existence. So that was clearly foresight, was seeing a way to bring these two companies together and just waiting for the right opportunity to do it. This has definitely been a good stretch of months for X and Xai, but who knows what the future holds? There's still a lot of risks out there. So we'll see.

[Jessica Mendoza]

That's all for today. Wednesday, April 16. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode by Peter Rudiger, Lauren Thomas and Suzanne Vernica. Thanks for listening. See you tomorrow.